Btl warning!!!!

Pobby

Interesting conversation with a friend today.He lives on a 2 year old estate comprising of flats and houses.Very nice area.He tells me that many are btl properties and just recently there is a sea of ``for sale``signs in place.Clearly these newbie landlords are finding it`s getting harder to make any return from their tenants.He wants to sell up but now there is downward pressure on prices as all these btl people are rushing to the door.Imho we will see a lot more of this in the coming months.

ceegee

I hope that this will improve things for first time buyers. Usually, BTL properties are the ones that would have been ideal for the FTBs but were snapped up by so many amateur property developers/landlords.

Give the poor FTBs a chance.

nelly_2

In Manchester theres enough 'flats for rent' to house the entire planet and that includes all the animals too

Debt_Free_Chick

A couple of observations .....

If you are a BTLer, research your market! Out in the sticks, we don't necessarily want laminate flooring, new carpets, state of the art kitchen etc. My partner and I want a modest farm-workers cottage with a battered interior, suitable for two (working) dogs (who are only allowed in the sitting room for a couple of hours each evening, but otherwise are kennelled outdoors - and they are out with my partner at work all day so never left alone in or around the house) and a forestry/farm worker (partner is a Fencing Contractor and Agricultural Engineer, neither of which is the cleanest of jobs!). We don't move to into a "Sarah Beeney designed property" :rotfl:

The only point is - are you marketing your property according to what people locally want? You don't know? Then ask 3, 4, 5 or even more local letting agents - "What is there a shortage of, locally?".

Second point - it's long been speculated that disappointed BTLers will be the cause of a property price crash as they find the returns disappointing and look to sell when prices are at a high. Add to this that many BTLers who were making a modest profit might now be making a modest loss, due to recent interest (mortgage) rate rises. But then, that would probably be "justice" as, in many areas, it's the speculative BTLers who fuelled at least some of the crazy increases recently.

I was staggered to have the property I bought four years ago at £350,000 recently valued at between £550,000 & £625,000 - even the Halifax property index for my area puts the value at £595,000. Madness!

Debt_Free_Chick

nelly wrote: »

In Manchester theres enough 'flats for rent' to house the entire planet and that includes all the animals too

Yeah - but find me a LL that is happy to accommodate tenants with "animals" :mad:

Most animals can't sign up for an AST though :rotfl:

pinkshoes

I had a nightmare trying to find somewhere to buy as a FTB, because everything was snapped up by BTLers before I even got a look in!! Of the 15 properties in this development, I think at least 10 out the 15 are being let out!! They all got sold really quickly though.

With interest rates increasing, then potentially the interest on a morgage will now be higher than the rent, so you'd need quite a hefty deposit to make a BTL profitable.

Gorgeous_George

BTLers bought the properties because there were tenants waiting to move in. Chicken, egg. Egg, chicken.

BTLers sell when the hassle involved outweighs the income. My BTL may be worth £90K today but I paid significantly less 6 years ago. My yield is based on my costs and not today's 'value'. If I was to sell, I'd be saddled with a CGT bill of £17K so the £90K figure in meaningless. I plan to keep the property forever and there is no CGT liability on death.



GG

nelly_2

Debt_Free_Chick wrote: »

Yeah - but find me a LL that is happy to accommodate tenants with "animals" :mad:

Most animals can't sign up for an AST though :rotfl:

noah ...............

RHemmings

Al_Mac wrote: »

The correct way to look at it:T The problem is, that so many have jumped on the bandwagon, with value of property being the driver, a quick buck, not social concerns or long term investment.:o

How is that the correct way of looking at it? Why don't you just take half the money you put in and calculate yield based on that. Or just take the number £28.92 and calculate yield based on that. It'd be massive.

There are lots of resources explaining yield, but a simple bank account example does it. Imagine that you have £1000 in a bank account, and interest is being paid into that account. Keeping things simple, imagine that the interest rate is 5% paid once a year. So after the first year, you have £1050, after the second you have £1102.50, after the third year you have £1157.63, etc. What would you do if the bank suddenly dropped your interest rate to 4.319%. You'd still get the £50 you got originally, but clearly it's a lower rate. Even after just a few years, a considerably lower interest rate that the bank is paying.

The fundamental problem with using your originally outlay to calculate yield is that you are, financially, comparing apples and oranges. The pounds that you used to buy a property even a few years ago were worth more than the pounds we have today. So if you calculate yields based on how many "today" pounds you get and compare that to an outlay in "a few years ago pounds", the yield you get is illusory, because the two numbers don't have the same buying power. Gives you a nice number to talk about at dinner parties, but not meaningful. Going back to the bank account example, even after just three years of 5% inflation, if you got the same £50 back from your initial £1000 outlay, it'd only be worth £43.19 in the pounds that you originally put into the account. Money loses value.

The extreme version of this is someone who bought a property for say £3000 in the 1960s, who is now renting it out for £200 a month. That's a yield, by your method, of 80%, fantastic!!!! But if that's a three bedroom terraced property in London, who would think that you're getting a decent return with that rent?

RHemmings

Al_Mac wrote: »

Did I upset you?

Could you please say whom that is addressed to?

RHemmings

Al_Mac wrote: »

You. I agreed that people were just concerned about current house values. You decided I needed a long, I don't do long, explanation about yields

I was speaking to someone the other day, bought three houses in 6 months, all rented, all just covering his mortgages, his belief was that he would keep them permanently rented, but would make real money by the % increases in house prices. Short term ism. In my opinion the problem with the new batch of BTLer's.

Well, I wasn't talking about bandwagonism, I was talking about the basic methods of calculating yield. I wasn't actually aiming the explanation at you, but really others that might read the thread. I come to a forum like this to effectively share knowledge. So I benefit from things others know, and hopefully people benefit from things I know. So when I saw GorgeousGeorge post something that I believe to be wrong, and you post a supporting comment, I posted the opposing argument. With my motivation being that people who come here to learn will be able to see both sides and make their own decision. I.e. I was addressing the thread and (perhaps arrogantly) the readership, rather than you in person.

Certainly I'd agree that jumping on the BTL bandwagon, where the only decent return is increases in the property's value is bubble thinking, and that there will eventually be a batch of "greatest fools" who take a bath. But since you said that, and I don't have an opposing argument, I didn't address that point.